Lesson 4 of 10 · All lessons in this module
- Financial assets, yields and expected versus actual returns
- What an interest rate is made of
- Required return, risk premia and excess returns
- Holding period return
- Arithmetic and geometric mean returns
- Annualised and continuously compounded returnsVideo lesson
- Gross, net, after-tax, real and leveraged returnsVideo lesson
- Taxing price and income returns
- Leverage through call options
- Integrated cases: from total return to what the investor keeps
This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.
Lesson 4 of 10 · 12 min
Holding period return
A holding period return measures everything you earned over one stretch of time, price change plus income, relative to what you paid.
In short
- Total return = income yield (dividends, coupons) + capital gain or loss (price change).
- Holding period return (HPR): . The period can be a day or ten years.
- To link several periods, multiply the terms and subtract 1. Never add returns across periods.
- Losses need larger gains to recover: after −40% you need +66.7% to break even.
- Decimal, fraction and percentage are interchangeable: 0.07 = 7/100 = 7%.
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